What happened

Shares of the commercial-stage healthcare company Axsome Therapeutics (AXSM 1.36%) were up by a handsome 31.4%, on heavy volume, as of 9:53 a.m. ET Friday. The stock price of the specialist in central nervous system disorders is shooting higher today in response to the Food and Drug Administration's (FDA) approval of its major depressive disorder (MDD) drug Auvelity.

Auvelity has been under review with the FDA for well over a year at this point. The drug's review took longer than expected due to issues with the analytical methods in the Chemistry, Manufacturing, and Controls section of its regulatory application. 

An investor giving two thumbs up against a black background.

Image source: Getty Images.

So what

Wall Street believes Auvelity's peak sales will come in between $1 billion to $3 billion for this high-value indication. That's a ginormous revenue forecast for a company that was valued at well under $2 billion as of Thursday's closing bell. 

What's more, this long-awaited approval ought to put Axsome on buyout watch. Psychiatric meds like Auvelity are highly coveted assets in the world of biopharma for a variety of reasons. Moreover, this drug would dovetail nicely with the portfolios of several top pharma companies such as Biogen and Pfizer. That being said, Axsome's brain trust will probably want an astronomical premium, relative to its current valuation, in a buyout scenario. 

Now what

Is Axsome's stock still a screaming buy after today's double-digit move higher? As a shareholder, I'm definitely biased on this matter. I think the stock has been unfairly punished by this bear market over the prior seven months. So, my view is that Axsome's stock is still grossly undervalued in light of Auvelity's commercial opportunity. In fact, I think this mid-cap biotech stock has large-cap potential in the wake of this game-changing FDA approval.